ISO New England sees precarious power reliability heading into winter

ISO New England said Dec. 6 that higher global heating oil and LNG prices, along with supply chain challenges and natural gas pipeline constraints, could limit fuel availability in New England if needed for power production this winter.

"In recent years, oil and LNG have filled the gaps when extended periods of very cold weather have constrained natural gas pipeline supplies," Gordon van Welie, ISO New England's president and CEO, said in a statement.

"Higher prices globally for these fuels, as well as pandemic-related supply chain challenges, could limit their availability in New England if needed to produce electricity this winter" and the region would be in a "precarious position if an extended cold snap were to develop and these fuels were not available," van Welie said.

New England has been dealing with winter energy security concerns for several years and ISO-NE sometimes sees power system conditions running up to the edge of reliability during winter, he said during a conference call with reporters to discuss the winter outlook.

ISO-NE expects power demand will peak at 19,710 MW during average winter weather conditions of 10 degrees F, and 20,349 MW if temperatures reach below average conditions of 5 F, according to the statement. The National Oceanic and Atmospheric Administration is projecting a warmer than average winter in New England.

Those demand projections are both about 2% lower than last year's forecasts, while New England's all-time winter peak demand record was set during a January 2004 cold snap when electricity usage reached 22,818 MW.

Underlying concerns

The region has talked about energy resource adequacy for many years, but developers have not been able to build more natural gas pipelines and after the winter of 2017/18 the ISO brought forward an energy security initiative that was not approved by federal regulators, van Welie said.

"So, we still have not solved the problem and with more electrification of vehicles and buildings we will need an even more robust solution," he said.

The ISO identified three reliability variables that are critical during winter. First is gas pipeline availability as constraints occur when there is simultaneous demand for gas to heat homes and operate electric power plants. Heating customers are served first and the remaining gas is available for power generators, the ISO said. The region uses oil or LNG when pipeline gas is unavailable or "prohibitively expensive," according to the presentation.

Secondly, current storage levels of oil and LNG are lower than in recent winters while prices are high globally. Pandemic-related supply chain issues like a lack of fuel oil truck drivers could limit deliveries, the ISO said.

The third variable is weather, as prolonged cold snaps heighten the risk that the ISO would need to implement emergency protocols, which can include blackouts or load shedding.

In severe events, system operators may be forced to call for controlled power outages to protect the overall grid, ISO-NE said.

Asked about the probability of requiring a load shedding event this winter, van Welie said it is low-probability event but how low is "very hard to say."

Additional variables to consider include the fact that roughly 2,000 MW of generation resources have retired since winter 2017/18 and the relative LNG price spread from New England and other regions has changed, he said.

Asian LNG prices are about $35/MMBtu and New England gas prices are about $17/MMBtu, van Welie said. That pricing dynamic has flipped over the years and LNG suppliers target the higher priced markets for their supply, meaning it is possible there could be fewer LNG deliveries into the region this winter.

Asked about ISO-NE's position heading into this winter compared to other years, van Welie said the ISO is "feeling more vulnerable" and what happened in Texas last February "changed everything." Texas and surrounding regions were hit with a long blast of cold weather that led to major power system failure including loss of life.

"The problem is not going away and will gradually get worse as we reduce fossil fuels while extreme weather becomes a bigger part of the equation," van Welie said.